Traditional variable universal life (VUL) products involve risk when subaccounts are invested in market-driven options.
Your clients likely know that life insurance provides valuable death benefit protection. However, have you helped them understand the ways cash value life insurance can be advantageous in addressing financial planning challenges such as taxes and market volatility?
Many individuals don’t consider or plan for tax risk until it is too late. In fact, a recent Lincoln Financial study — Lincoln Financial’s Financial Planning Survey, which was conducted by Hanover Research and published in January — showed that less than a third of adults are actively preparing for the impact of taxes on their investments and retirement accounts. Focused on accumulation, they may not consider future tax rates when they plan to draw down and use the assets they’ve saved.
(Related: Tax Moves to Make Before the Election)
As you help your clients plan for retirement, taxes, and volatility, accumulation-focused variable universal life (VUL) policies are emerging as solutions in the market that should be strongly considered to help address these needs.
1. Asset location is as important as asset allocation.
While asset allocation is a vital part of retirement planning, the tax treatment of the types of assets used in planning is equally important. Cash value life insurance can help provide important tax benefits, especially for individuals faced with the dilemma of staying invested in the market during a time of elevated volatility.
Today, accumulation VUL products are being offered with indexed accounts that offer policyowners more ways to grow their retirement savings with a level of protection during market downturns. These indexed accounts provide even greater investment flexibility, control and downside protection.
Clients can align their investment strategy to their financial objectives and risk tolerance levels — from accumulation through distribution — in a tax-advantaged way that complements traditional retirement vehicles.